Are You a Spendthrift? Read This!
A spendthrift is someone who spends money recklessly. He splurges on comforts and luxuries. Another trait of such people could be that they get carried away by sales and discounts offered by stores. The notion is that availing of such offers will help in saving money indirectly. This leads many people to purchase things which they don’t need at all.
While some people develop this as a habit and find it difficult to get out of it, some others don’t even realise that they are reckless spenders. However, in both cases the end result is the same. You might not be able to meet your important financial goals such as retirement, children’s education and their marriage, and so on. Moreover, you can also be stuck in a debt trap and ruin your financial health.
Now you might be thinking how you can avoid or stop being a reckless spender. PersonalFN tells you how to go about it.
PersonalFN is of the view that spending recklessly may not have a short term impact. But over the long term its effects can be extremely damaging. To avoid being in such situations, everyone should determine their financial goals and adopt a prudent approach towards financial planning. We understand that you might not have the time and / or expertise to make a prudent financial plan. Hence, it would be sensible to take the aid of an experienced and professional financial planner who will be able to help you achieve your financial goals in a better way.
- Determine the amount that you should spend every month
For doing this, you have to first list down your financial goals. Then you must find out when these goals would be due and how much money would be required at the time of the realisation of these goals (keeping in mind inflation). The next step would be to calculate the amount that is required to be saved every month (taking into account the rate of return on investments). Based on the amount that is required to be saved and invested every month, you should determine your monthly expenditures.
- Plan for your personal expenses in advance
It is better to plan for your and your family’s personal expenses (such as clothes, accessories, etc.) in advance. Make a budget for the personal expenses and make sure the entire family sticks to it. It is okay to purchase things during a sale and buy discounted items, but don’t let the marketing strategies used by the stores entice you into buying unnecessary things. If you already are a spendthrift and are facing trouble in saving for your financial goals, explain the situation to your family, so that they can help you to come out of this habit and also work towards reducing their personal expenses.
- Make a budget for household expenses
Apart from personal expenses, a budget should also be prepared for household expenditure. This budget should include all the household expenses, however big or small. All shopping trips must be well planned so as to save on transportation costs. Also, make sure your family doesn’t waste food or consumes too much electricity and has a controlled usage of the mobile / telephone. You should go on an outing only when you have saved for it systematically over the months.
- Find another source of income
Simply reducing expenses won’t be enough if you have already caused too much damage to your financial health by spending recklessly. You might also need to find an extra source of income such as a part time job, even if you are already working full time, to make up for the lost money. You can also consider encouraging your spouse to find a job, if he / she is not already earning. It is necessary to manage your finances well during crisis so that you can protect yourself and your family from falling into a debt trap.
PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.
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